LEGISLATIVE FISCAL ESTIMATE

ASSEMBLY, No. 5158

STATE OF NEW JERSEY

221st LEGISLATURE

 

DATED: JANUARY 9, 2026

 

 

SUMMARY

 

Synopsis:

Provides TPAF members and certain retirees same benefits provided to members enrolled in retirement system before July 1, 2007.

Type of Impact:

Annual State expenditure increase.

Agencies Affected:

Department of the Treasury.

 

 

Office of Legislative Services Estimate

Fiscal Impact

 

Annual 

 

 

State Expenditure Increase

 

$397.9 million

 

 

 

·         The Office of Legislative Services (OLS) estimates that the annual employer cost over a 25-year closed amortization period to pay for the unfunded liability associated with the transfer of members to Tier 1 of the Teachers’ Pension and Annuity Fund is an estimated $397.9 million.

 

·         The State will bear the total cost as the State is responsible for the employer contributions for the Teachers’ Pension and Annuity Fund.

 

 

BILL DESCRIPTION

 

      This bill removes the membership tiers established in the Teachers’ Pension and Annuity Fund and transfers all current non-retired members of the Teachers’ Pension and Annuity Fund to the membership tier referred to as “Tier 1” by the Division of Pensions and Benefits.  All transferred members will be considered eligible for any benefits associated with Tier 1.  Any changes to the early retirement, deferred retirement, service retirement, and maximum base salary resulting from the transfer of members to Tier 1 of the Teachers’ Pension and Annuity Fund will only affect members who begin processing a retirement application after the bill is enacted.  The bill also permits any affected employees currently enrolled as participants of the Defined Contribution Retirement Program to transfer their membership from the Defined Contribution Retirement Program to the Teachers’ Pension and Annuity Fund.  Employees in the Defined Contribution Retirement Program who opt out of the transfer will remain in the Defined Contribution Retirement Program.  Additionally, any members of the Teachers’ Pension and Annuity Fund who are receiving long term disability insurance will be eligible to apply for disability retirement provided that they apply within two calendar years following the enactment of the bill.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS estimates that the annual employer cost over a 25-year closed amortization period to pay for the unfunded liability associated with the transfer of members to Tier 1 of the Teachers’ Pension and Annuity Fund is an estimated $397.9 million.  The State will bear the total cost as the State is responsible for the employer contributions for the Teachers’ Pension and Annuity Fund.

      The OLS estimates that the total nominal cumulative value of transferring all members to Tier 1 of the Teachers’ Pension and Annuity Fund, accounting for actuarial economic assumptions about changes in salary and wage and price inflation, is $10.3 billion.  The present value of this total cost is estimated at $4.6 billion.

      This cost estimate utilizes the following assumptions: all members retire with 25 years of service and no early retirements; all members are nonveterans; all members have at least five years of service credit; and all members receive 3.5 percent salary increases consistent with the current union contract information for the Teachers’ Pension and Annuity Fund.

      This estimate is based on 139,700 State and local member records from the Teachers’ Pension and Annuity Fund.  This estimate does not include the costs associated with the bill’s provisions that permit the transfer of members from the Defined Contribution Retirement Program to the Teachers’ Pension and Annuity Fund, nor the costs associated with the transfer of members from receiving disability insurance to a disability pension.

 

 

Section:

State Government

Analyst:

Camryn Mathews

Associate Fiscal Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

 

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).